Saturday, December 13, 2014

A toast to all the great ones that we've missed

One of the things that inevitably happens when you're in the angel or VC investing business for a couple of years is that besides a hopefully healthy portfolio, you're also building a growing anti-portfolio. As far as I know, the term "anti-portfolio" has been coined by Bessemer. Its meaning is described very well on Bessemer's website, and because it's so hilarious I want to quote it in its entirety:

"Bessemer Venture Partners is perhaps the nation's oldest venture capital firm, carrying on an unbroken practice of venture capital investing that stretches back to 1911. This long and storied history has afforded our firm an unparalleled number of opportunities to completely screw up.

Over the course of our history, we did invest in a wig company, a french-fry company, and the Lahaina, Ka'anapali & Pacific Railroad. However, we chose to decline these investments, each of which we had the opportunity to invest in, and each of which later blossomed into a tremendously successful company.

Our reasons for passing on these investments varied. In some cases, we were making a conscious act of generosity to another, younger venture firm, down on their luck, who we felt could really use a billion dollars in gains. In other cases, our partners had already run out of spaces on the year's Schedule D and feared that another entry would require them to attach a separate sheet.

Whatever the reason, we would like to honor these companies -- our "anti-portfolio" -- whose phenomenal success inspires us in our ongoing endeavors to build growing businesses. Or, to put it another way: if we had invested in any of these companies, we might not still be working."

I'm a big fan of dealing with failures openly, and I applaud Bessemer for being so open about their anti-portfolio. In the next version of our (meanwhile pretty outdated) website we should add a section about Point Nine's biggest misses, but let me already give you a sneak preview into my personal anti-portfolio:

The two "passes" which I regret the most are SoundCloud and TransferWise. The reason why these two ones stand out is that I had the opportunity to invest in them (at an early stage and at reasonable terms), spent some time looking at them and decided to pass. Since then, both SoundCloud and TransferWise have become "unicorns" or are on their way getting there. Congrats to the founders and early investors of these fantastic companies – Alexander, Eric, Christophe and Jan (SoundCloud) and Taveet, SeedCamp and Index (TransferWise)!

As far as I know, these three are the only $1B-valuation companies that we've missed so far, but there are several other companies that we passed on and which are doing great. Most of these are probably worth well over $100M by now and they include:

The reasons for passing an all of these great companies varied and included concerns about market size, competition, defensibility, valuation ... all bullshit with the benefit of hindsight. :-) While I am of course trying to learn from all of these mistakes, I also know that it's inevitable that my anti-portfolio will continue to grow over time. And although that can hurt, I know that that is okay – at least as long as we're happy with our non-anti-portfolio.